Stock Market Retesting of the January Low

By: Donald_W_Dony

North American markets found support in mid-January after three weeks of sharp declines. However, after a brief rebound, those key support levels are expected to be retested again in February.

The S&P 500 has bounced off of the 1860-1875 range three times in the last 6 months.

Now that the rebound rally has stalled and rolled-over, the index is expected to retest the support range again over the next week or two.

The Dow Jones Industrial Average bounced off of the 15,500-15,750 range in January, as it did last August.

With the recent roll-over, the Dow is now expected to pullback to those levels over the next few weeks.

NASDAQ has also rebounded from a previous low (4,292 in August) last month. We anticipate the index will retest the 4,300-4,400 band over the next few weeks.

For the TSX, the mid-term trend still remains down. The index has posted a series of lower lows and lower highs over the last 8 months.

The most recent trough in January, produced a short-term bounce that has now stalled and rolled-over.

We believe the Canadian index will retest the 11,900-12,000 zone again in the next few weeks.

Bottom line: The U.S. markets are expected to retest significant support levels over the next 1 to 2 weeks.

The TSX should also find underpinning at the mid-January support level.

Note: Should the indexes break these key support levels, the projected outlook would be another 8% decline below the key support levels.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2016 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present.  He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.   

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms.  He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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